Question

Kira has $500 in an account that earns 15% interest compounded annually.To the nearest cent, how much interest will she earn in 3 years?Use the formula B=p(1+r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.

Answer 1

Given: The formula

$\begin{gathered} B=p(1+r)^t \\ p=500 \\ r=15\%=0.15 \\ t=3 \end{gathered}$

To Determine: The interest

Solution

Let us substitute the given into the formula

$\begin{gathered} B=500(1+0.15)^3 \\ B=500(1.150^3 \\ B=760.4375 \\ B\approx760.44 \end{gathered}$

The interest can be calculated as

$\begin{gathered} Interest=B-p \\ Interest=760.44-500 \\ Interest=260.44 \end{gathered}$

Hence, the interest is $260.44